Factoring: The Solution to a Freight Brokerís Cash Flow NightmareWhen youíre a Freight Broker, you just have the time or the inclination to deliberate on your brokerage firmís financial details. Yes, youíre an entrepreneur through and through, and have not only the knowledge and ability to locate freight loads but also the contacts that come with freight brokerage. But brokerages, typically, have such diversified cash flows that they can prove to be quite challenging to manage.
Donít Get Crushed While Youíre in the Middle
On one side you have the trucking companies that demand immediate payments to be able to run their operations at a faster pace. A majority of truck operators just cannot afford the long wait that usually accompanies invoices because they also need the funds for fuel, equipment maintenance, and payroll, among other expenses. Meanwhile, the equationís other side has shippers who ask for terms to pay in 30 to 60 days. And you are right in the middle of these two demanding entities and you are required to make everything work.
Brokers employed by large freight brokerages generally donít have such a predicament, mainly because their companies have large amounts of cash reserves that can quickly pay off truckers and have sufficient funds retained while waiting for slow-paying shippers to make good on their payments. But for the Freight Broker who doesnít have this luxury, the cash flow is disrupted and results in some pretty serious financial problems that can even lead to a companyís bankruptcy.
Solving and Surviving Your Worst Financial Conditions
You can ask shippers to pay at once, but this strategy eventually results in your cash flow being controlled by shippers who can revert back to their former slow-paying habits. This unpredictability of when revenue will be generated almost always leads to a company closing down. A better strategy would be to obtain additional funds, of course, but do you get them from a bank? Consider the rigid requirements that a bank imposes on a borrower. Consider the time which lapses before your loan gets approved. By the time it is, if it is even considered for approval, you may not have a business to operate.
Factoring is a financing product that can solve some of the worst financial conditions that a business can be in. By advancing funds to you from your accounts receivable or invoices, you are able to meet your financial obligations to truck drivers and other personnel on your payroll, purchase or produce additional materials for marketing collaterals to acquire more customers, and invest in new opportunities directly related or beneficial to your business. Factoring helps you focus on sustaining a business instead of worrying about cash flow.
Grow Your Freight Brokerage Business
To engage the services of a factoring company is not difficult at all. The foremost requirement is for you to have shippers and customers who are creditworthy. Why is creditworthiness of shippers and customers a primary qualification? Because the paying capacity of shippers and customers is the core of the entire transaction. The invoices that you submit should be those for accepted and delivered loads. These invoices should also be free of encumbrances, liens, tax or legal problems.
Since the factoring company that you eventually choose will also act as your settlement agent as soon as your customers and shippers pay in full, you have to select one that is trustworthy. NeeBo Capital fits that description to a T and offers so much more than cash flow management. NeeBo Capital can provide a Freight Broker like you other services you might need such as restructuring of payables, credit insurance, and merchant cash advance, among others.
Why Choose Us?
Rates at 0.59% - 1.5% for 30 days
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General Articles about Accounts Receivable Financing and Factoring:
» 08/01/2012 Debt Financing or Off Balance Sheet Financing?
» 09/15/2011 What to know when selecting a Factoring Company
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